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Data Analytics…Banking On It

Short takes...on analytics

Posted by Donald Monson, Senior Manager, Deloitte Financial Advisory Services LLP
Posted by Sara Vandermark, Senior Manager, Deloitte Financial Advisory Services LLP

With increased scrutiny by various Federal groups, remaining in compliance is becoming increasingly difficult and at the same time, ever more important.  Billions of dollars in fines related to anti-money laundering (AML), fraud, and LIBOR manipulation are sending a message that banks face stiff penalties and incalculable damage to their reputations as a result of non-compliance.  Growing challenges in AML and terrorist financing have led to an emergence of more advanced analyses and reporting methods to help uncover and report suspected suspicious activities.

As of April 1, 2013, the new Suspicious Activity Report (SAR) form is the only acceptable format for submitting suspicious banking activity to the Financial Crimes Enforcement Network (FinCEN).  The new SAR form is full of data, including broad-based categorization of suspicious activity and the nature of the parties involved. Capturing such information is the first step, but applying advanced analytics to mine that information may reveal a far richer and more nuanced understanding of the suspicious activity.

Today’s AML systems are good at sifting through significant amounts of data and flagging transactions for investigation. The objective is to move from being reactive to proactive; from looking at what may be suspicious to predicting, knowing, and mitigating fraud and risk before it proliferates.  To do this, banks need analytics for more informed decision-making and to promote better insight into unusual or suspicious activity.

For example, take the hypothetical case study presented in “Suspicious Activity Reports and Analytics:  Staying ahead of the Compliance Curve.” In this scenario, a correspondent bank intends to use analytics to improve upon its SAR process. We follow the bank as it progresses through three stages:  data structuring and cleansing, detection scenario analysis, and ultimately threshold refinement and system improvements.

As you will learn from this article, the SAR process remains a challenging mix of automated and manual activities that cry out for improvement in quality and efficiency in monitoring AML activity. While financial executives may believe their transaction monitoring systems are performing satisfactorily, feedback from analytics may quantify just how effective existing processes are and uncover possible avenues for improvement. The time to be proactive is now; later may not offer many options beyond paying stiff fines.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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